Zaeful Hanefi Z.Z.
"
ABSTRACTIn the last couple of years, Vietnam became one of the attractive target
countries for international investors because of its stable political environment, high
economic growth and enormous natural resources.
This paper provides an analysis that will describe feasibility on penetrating
the Vietnamese instant noodle market and selection of the most appropriate market
entry strategy.
The analysis indicates that Vietnam has a significant political stability with a
great government role in supporting investment in this country, by providing ease
and guarantee for investors. This shows future certainty, a very important factor for
every investor.
From economic aspect, a country with 70 million population is a huge market
High economic growth (more than 5% p.a) and enormous natural resources made
Vietnam a promising market. The only constraint is lack of transportation and
communication facilities in all over the country.
Chinese culture that has a strong influence in the Vietnamese society gives
the community sense of appreciation toward private sector. High education and
literacy rate, and good health facilities give an added value on this market viability.
Vietnamese instant noodle industry is dominated by VIFON, a state owned
company with 52 % market share. But it seems this monopolist emphasizes its role as
government agent of development (with the mission of providing food for Vietna
mese) instead of a monopolist role that usually tends to keep its market domination
by killing the other competitors in the market. In general, Vietnamese instant noodle
market still provide enough opportunities for new entrants to come and create their
competitive advantages. Vietnamese consumers are used to consume noodle, as one
of China culture influence to their eating habits.
There are some constraints which will be faced by investors, such as econom
ic constraints (poor physical infrastructure & distribution network and different
consumer need), managerial constraints (different managerial role and task re
quirement), and institutional constraints (government policy and quality of human
resources). These should be deliberately considered and anticipated by investors
who intend to enter Vietnam market.
All the analysis come to the conclusion that the most appropriate market
entry strategy is Foreign Direct Investment (FDI).
Financial analysis confirms that the strategy is financially feasible. Among
the 2 scenarios, Scenario I has a better financial feasibility and that?s why it becomes
the proposed scenario.
Then, in order to protect the investment from foreign exchange risk, it is
suggested to do preventive actions, such as: diversification on operation and financing, and hedging via option market."
